an economics scrapbook

The face of the river, in time, became a wonderful book . . . which told its mind to me without reserve, delivering its most cherished secrets as clearly as if it had uttered them with a voice.
-- Mark Twain

The Paper Boat returns to open waters, after an extended holiday tied up at dock. Happy New Year to all! Let’s take a moment to look back at the events of the past year, and then we’ll move on to see what may be in store for the year ahead. Largely, we were right on target with last year’s predictions. How 2012 will unfold is slightly murkier, but we do have several good ideas we’d like to share.

The Paper Boat offered a list of predictions for last year in Crystal Visions 2011. On the economic front we were spot on concerning the deteriorating US housing market, popping housing bubbles in Australia and China, the collapsing Eurozone, continued bank closures, high unemployment, a slowdown in commodities, further tightening on lending and shrinking credit availability, further quantitative easing and covert bailouts, pressure on unions, rising poverty, emerging political unrest and protest, growing public interest in economics and policy, loss of civil liberties and the growing popularity of Libertarianism, youth led grass roots movements using the internet to organize, and a general mounting distrust for government.

A couple of our predictions missed the mark to some degree or another. Concerning a crisis in municipal bonds, I had imagined something extreme happening. I admit I was somewhat swung by Meredith Whitney’s erroneous warnings at the time that doom was imminent. While cities and states have been hit hard with falling revenue, in some cases even facing bankruptcy, movement in the municipal bond market saw no meltdown. We also averted a crisis in public pensions last year. This will come to a head eventually, but 2011 was a premature call regarding when it would take place. I expected also to see more public attention paid to green tech and bioengineering. The dismal economic news sucked focus from scientific and environmental issues, though developments have been made in those areas. Overall, however, our 2011 predictions were pretty much on the mark.

So that said, you may wonder what sort of tidbits and treasures are to be reaped from the salty brine as The Paper Boat casts its nets upon the waters ahead. The view as seen from The Paper Boat is a broad one, based on extensive research of what the most accurate economists and innovative thinkers of our time have to offer. We focus on trends and the shifting tides of human psychology, with a perspective born of the humanities as well as economics. We do not collect or analyze data nor crunch numbers, though remain ever grateful to and respectful of those who provide such essential raw materials upon which to develop the theoretical. In light of this, we offer that while our predictions are largely accurate they do not offer investment advice as much as provide an exploration of financial possibility. As I have said in the past, things can transpire more or less rapidly depending on many factors and so some of the trends we see forming may take longer than the year to finally play out.

Here, then, is a list of the important events and trends we expect to see in 2012:

Economy continues to decline despite the current media talk of a turnaround. Possible recession.

This is an election year, so trends may play out differently depending on who ends up as President. I predict Obama will win another term in office because he is perceived as the most populist of the candidates at a time when the masses are being squeezed from above. He will gain success by aligning himself with the Occupy Wall Street movement, which has been painted as an anti-Republican action by the mainstream media. However, as usual Obama’s real actions will be less than radical, as he is actually more closely aligned with the one percent and will make every attempt to attain reelection by playing to the polls, bankers and union sponsorship. If Romney wins we will likely see trouble with China and probably more war, as he has already declared his intent to proclaim China a currency manipulator and raise tariffs on Chinese produced goods. Romney is not adverse to taking action against Iran over their attempts to build a nuke, either. If Ron Paul is elected we will not see World War III, but we may see a more dramatic economic downturn, as the social support net is diminished and government and Federal bank stimulus is curbed. Future events and the timeline within which they take place are made somewhat murkier in 2012 because of elections, though this factor will actually have a greater effect on the years that follow.